From baking bread and biscuits for neighbourhood markets to producing light engineering components, supplying raw materials to export industries, or weaving Tangail sarees that carry generations of heritage, Bangladesh’s cottage, micro, small and medium enterprises (CMSMEs) form the invisible foundation of the economy.
Nearly every industrial enterprise in the country belongs to this category. Yet the sector that creates most jobs and nurtures the largest pool of entrepreneurs contributes only about one-third of national output—a striking contrast with many competing Asian economies.
The paradox illustrates one of Bangladesh’s biggest untapped economic opportunities.
According to the Bangladesh Bureau of Statistics, over 99 per cent of industrial establishments fall under the CMSME category. The sector directly employs more than three crore people and accounts for roughly 85 per cent of manufacturing employment. About 70 per cent of these enterprises operate outside major cities, making them the backbone of rural industrialisation.
Despite their overwhelming presence, CMSMEs contribute only about 32 per cent of Bangladesh’s gross domestic product.
That figure pales beside the global average and many regional competitors.
In China, SMEs generate nearly 60 per cent of GDP. India’s MSME sector contributes about 31 per cent to GDP while accounting for almost half of the country’s exports. Vietnam’s SMEs contribute around 40 per cent of GDP, while Sri Lanka’s CMSME sector contributes more than 50 per cent, in line with the global average.
According to the UN SME Report 2025, MSMEs are the absolute backbone of the global economy, making up over 90% of all businesses worldwide and accounting for over 70 per cent of all employment and over 50 per cent of the global GDP.
With higher contributions in OECD countries and less in developing countries, the world is way ahead of Bangladesh.
The gap is not one of entrepreneurship. It is one of productivity.
Bangladesh has never lacked entrepreneurs. It has lacked an ecosystem that allows them to grow.
For generations, small business owners relied on little more than family savings, cut-throat informal lenders and relentless determination.
Today, access to finance has improved significantly. Bangladesh Bank introduced multiple refinance schemes, directed banks to expand CMSME lending and encouraged financial institutions to treat the sector as a strategic priority rather than a social obligation.
CMSMEs, aware of modern bank financing, are availing themselves of loans, even without collateral, at around 15 per cent annual interest, which informal lenders used to charge in a month.
More than 16 per cent of outstanding bank credit now supports CMSMEs, while the central bank made it mandatory to disburse 25 per cent of new loans to CMSMEs before rising further to 27 per cent by 2029.
The banking sector, struggling with defaulting large corporate loans—over 30 per cent of the total outstanding—is finding growth and safety in small business financing, as repayment is far better.
Through Bangladesh Bank’s refinance programmes, eligible borrowers can obtain loans at single-digit interest rates, while women entrepreneurs have access to concessional financing at 5 per cent interest.
The proposed national budget has also significantly increased support for the sector, including a Tk2,000 crore allocation, up from Tk300 crore, for concessional loans to CMSMEs, alongside separate funds for start-ups and creative industries.
Yet finance is no longer the lone defining constraint. The larger obstacles lie elsewhere.
Technology adoption remains weak. Product quality often falls short of international standards. Marketing capability is limited. Awareness of regulatory compliance remains lacking. Export procedures are complex for small businesses. Skills shortages persist.
Above all, market access remains elusive.
While developed economies are preparing their CMSMEs for artificial intelligence, digital manufacturing and the next generation of global supply chains, many Bangladeshi entrepreneurs are still grappling with a far more basic challenge: understanding how to reach profitable markets.
A recent study by Business Initiative Leading Development (BUILD) paints a sobering picture.
Only 13 per cent of surveyed SMEs participate in exports, and none exports directly. Nearly all depend on intermediaries, sacrificing margin.
Just 18 per cent know about bonded warehouse facilities, while none has ever used them. Fewer than 2 per cent are familiar with Special Regulatory Orders that govern export incentives.
Many respondents cited licensing barriers, procedural complexity, the inability to import raw materials directly and limited institutional support as the main reasons for remaining confined to the domestic market.
The findings suggest Bangladesh’s problem is less about entrepreneurial ambition than institutional design.
Nearly half of the non-exporting firms surveyed said they would consider entering export markets if duty-free imports and export procedures became simpler.
Other countries have already moved in that direction.
India’s Manufacturing and Other Operations in Warehouse Regulations allow manufacturers to import inputs duty-free without imposing export obligations. Duties are paid only when goods enter the domestic market, eliminating a longstanding dilemma for partial exporters.
Vietnam has introduced a compliance-based customs system that rewards trustworthy businesses with faster clearance regardless of company size. According to the World Bank, SME export participation increased significantly within three years of implementation.
Across the European Union, shared customs warehouses enable multiple SMEs to use a single licensed operator, spreading compliance costs across hundreds of businesses rather than forcing each enterprise to bear them individually.
Such models could be transformative for Bangladesh’s industrial clusters—from Kumarkhali’s home textiles and Tangail’s handloom industry to Chokoria’s furniture manufacturers and Sirajganj’s hosiery producers.
Small textile entrepreneurs have to pay a 40 per cent import duty on cotton, and waiting a long time for duty refunds against potential exports or local sales proceeds eats away at their margins because of working capital financing costs.
Many of these clusters possess export-quality products but lack the institutional support needed to compete globally.
Policy experts argue that Bangladesh’s export ecosystem remains heavily designed around large manufacturers, particularly the ready-made garment industry, leaving thousands of smaller manufacturers outside the formal export chain.
High duties on imported inputs, limited bonded warehouse access, lengthy duty drawback procedures and compliance costs create structural disadvantages for firms that could otherwise become exporters.
The result is an economy where entrepreneurial energy is abundant but productivity remains constrained.
Recent government initiatives suggest policymakers increasingly recognise the challenge.
The proposed budget expands support for CMSMEs, while Bangladesh Bank has launched new refinance facilities and cluster financing programmes alongside easing small businesses’ access to the global online market.
The SME Foundation continues to provide training, business development and entrepreneurship support despite operating with limited resources.
Yet the next phase of reform will require more than additional funding.
Simplifying regulations, expanding digital services, improving technology adoption, strengthening quality certification, modernising customs procedures and connecting SMEs directly with international markets may ultimately prove more important than subsidised credit alone.
Bangladesh’s next growth story, intended to be inclusive, is unlikely to be written solely by another large factory or industrial zone.
It may instead emerge from millions of entrepreneurs already producing goods in villages, district towns and city neighbourhoods across the country.
The question is no longer whether CMSMEs matter. They already power Bangladesh’s economy.
The question is whether public policy can finally unlock the productivity, competitiveness and export potential of the country’s largest—and still left-behind—growth engine.
